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LONDON MARKET REFORM DELINKING. AGENDA Background Contract Certainty What is Delinking? Market Closing Performance The Myths Current usage Summary.

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Presentation on theme: "LONDON MARKET REFORM DELINKING. AGENDA Background Contract Certainty What is Delinking? Market Closing Performance The Myths Current usage Summary."— Presentation transcript:

1 LONDON MARKET REFORM DELINKING

2 AGENDA Background Contract Certainty What is Delinking? Market Closing Performance The Myths Current usage Summary

3 Part of the International Process Compliance (IPC) Reforms (1998) –Align the London market with international processes –Improve flow of information to underwriters Incorporated into the LMP Programme –Faster premium payment –Enables earlier documentation to client Contract Certainty –Early delivery of Signed lines Premium Payment Working Party –Faster premium payment BACKGROUND

4 Current MRG Initiative Project started at 1st January 2007 aimed at doubling usage of delinking Identified what barriers exist to using Delinking and how these can be fixed MRG have agreed to provide each Broker with a monthly report showing what has been Delinked. MRG have set targets for usage: –Q2: 50% –Q3: 60% –Q4: 80% - Mandatory as at 01/01/2008 Market Rollout Plan provided to MRG for consideration

5 LONDON MARKET CLOSING London Market closings are submitted on an LPAN Submission of the LPAN to XIS provides: –advice of Closing details –notification of signed lines –authority for XIS to pay underwriters Broker submits the LPAN once client pays –NOT when the information is available THE PROBLEM

6 Non-XIS (re)insurers advised of: - Closing note - signed lines Pre DELINKING Risk inception date (Re)insurer writes risk Producing broker receives: - evidence of cover (including signed lines) - debit note Client receives: - evidence of cover - debit note TOT date XIS check and resolve queries XIS advise (re)insurers of signed lines and payment Funds transfer 68+ 0-1560 Client pays London Broker: - signs down - produces evidence of cover - produces debit note Latest date for PAN submission to XIS Over 80% of risks submitted on time Only 20% of premium is received by SDD

7 WHAT IS DELINKING? Post Placement separation of the Closing submission (technical account) to XIS (& underwriters) from the instruction to settle A two stage process – Advice of closing details and signed lines (LPAN) Timing to meet the Contract Certainty/FSA targets – Trigger settlement once the client pays At the same time as the old LPAN submission

8 XIS check and resolve queries XIS advise (re)insurers of signed lines LPAN submitted to XIS DELINKED CLOSING Risk inception date (Re)insurer writes risk 0-15 Client pays Pending file Broker triggers payment XIS advises Underwriters of payment London Broker: - produces evidence of cover - produces debit note Non-XIS (re)insurers advised of: - Closing note - signed lines Funds transfer Trigger date + 3 days Broker signs down the risk Client receives: - evidence of cover - debit note Producing broker receives: - evidence of cover - debit note

9 BROKER RELEASE OF FUNDS On Line Trigger –Common facility for Lloyds/IUA business –Available via the XIS screens –Release items held on the pending file Electronic RESETT message –Automatic trigger from Broker system –Standard international ACORD message Money released into Settlement that evening

10 PAYMENT PERFORMANCE 27% 53% 27% 20% Figures include cash and first installments only Based on total in-scope premium signed for 2005 up to August. Data supplied by Xchanging

11 QUERIES/REJECTION RATES Closing Queries –Items where the Closing submission is queried by XIS 22% Closing Rejections –Items rejected back to the Broker for correction and resubmission 4%

12 SCOPE OF DELINKING Includes –Original premiums –Additional premiums –Return premiums Excludes –Proportional Treaties –Reinstatement premiums –Premium reserves May not be suitable for –Short Terms of Trade periods –Planned/Flexible Settlement schemes Direct Facultative XOL

13 Broker Signing Messages - BSM –EVERYTHING SETTLED THAT DAY. Includes payment of previously Delinked items and cash (Non-Delinked) signings. - IPC BSM – An EDI or CSV message in the same format as BSM showing EVERYTHING DELINKED THAT DAY applies to all transactions - DL5089 CSV File –For A&S Repository submissions only shows EVERYTHING SIGNED THAT DAY – Delinked and Non-Delinked

14 DELINKING MYTHS Delinked risks are paid later than non Delinked –Analysis of Delinked submissions disproves this commonly stated issue Underwriters cannot tell if a delinked risk has been paid –Separate messages are sent to Underwriters by XIS to advise when a delinked risk has been submitted and of the subsequent payment Brokers just want to delink risks to keep them off the late payers list –The XIS Signing Performance Report for delinked items is based on the payment trigger date - not the LPAN submission

15 DELINKING MYTHS – Contd Just another Market Reform requiring costly systems changes –Brokers submit the existing LPAN with a Delinked stamp on it Payments can be released using the XIS on-line trigger facility –Underwriters will need to change their systems if they want to take advantage of the earlier Delinked message. Most Underwriter Software packages already support delinked messages

16 Convertible Currency Processing For convertible currency transactions a notional rate of exchange must be provided at the Delinking stage. When the premium is released for settlement, the rate of exchange may be updated with the actual rate which will apply Rate of exchange may be updated via RESETT or Delinking Trigger If settlement rate of exchange varies more / less than 10% of original rate of exchange then release is prevented. Contact XIS to release on your behalf

17 Miscellaneous Settlement Due Date (SDD) –Delinked risks may be released for settlement, before, on or after the SDD. If they are released after the SDD, you will be late signed. Premium Payment Warranty (PPW) –Delinked risks may be released for settlement up to and including the PPW Date. Underwriter Proof –Once date has been passed underwriter proof is required, they will accept the premium –Evidence of underwriter proof should be sent to Xchanging who will release on your behalf

18 BENEFITS - Brokers A standard process for dealing with XIS and non-XIS insurers Queries resolved earlier Control of payment is retained Enables Contract Certainty requirement for Signed Lines to be achieved Consistent with A&S processes

19 BENEFITS - Underwriters Earlier advice of signed lines: –Provide confirmation of exposure –Assist credit control –Eliminate effort in chasing broker for details –Xchanging messages Closing queries and corrections should not delay settlement Consistent with A&S processes

20 BENEFITS - XIS The checking of Closings and resolution of queries is no longer time critical to premium payment Reduces processing peaks and enables better workflow management Should a processing backlog occur it should not impact premium payment Earlier policy preparation is possible

21 Getting Started Who will release funds? Will you use the RESETT or Delinking Trigger? Get Delinking trigger IDs set up or your RESETT software configured Get IPC Delinked stamp made Consider whether you will require the IPCBSM Consider processing some test transactions

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23 SUMMARY The Delinking process is beneficial to your organisation It supports the Contract Certainty and FSA requirements Closing queries and rejections are no longer on the critical path for premium payment This results in improved premium payment performance Premium performance and Delinking usage will be monitored over the next six months Eliminates Londonisms

24 Q & A

25 LONDON MARKET REFORM DELINKING


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